Budget Message for 2017-18 Fiscal year

It is my privilege to present a balanced Operating and Capital Improvement Program Budget, which includes a small surplus, for the 2017/18 fiscal year.

The 2017/18 budget program reflects the City Council's tradition of careful stewardship of the City's finances, while continuing to expand upon our reputation for innovative and progressive community leadership. The focus of our budget is to maintain our commitment to provide quality programs, events, and services, and to also maintain a quality infrastructure for our residents, businesses and visitors.

Under the premise of being financially transparent, this budget is consistent with the updated Strategic Plan Action Item 5A. “Improve transparency and communication with the public regarding continuous monitoring and internal controls of City finances.”

While forecasted revenues are projected to slightly exceed anticipated operating expenditures due to an improving economy, the margin of surplus is only 2.8%. However, due to pressing needs for infrastructure improvements, most of the surplus operating funds will be transferred into the City's Capital Improvement Program (CIP) for the upcoming fiscal year. The City will use the remainder of the surplus operating funds plus limited resources from General Fund reserves to fund a one-time contribution of $200,000 to the Rosemead Chamber of Commerce.

Aside from having a balanced operating budget, the other “good news” is that the projected “fund balance” (commonly referred to as reserves) in the General Fund is expected to be $17.9 million at the end of the 2017/18 fiscal year. (The City has also accumulated over $3 million in a separate trust fund to pay for future retiree medical insurance obligations.) Therefore, with a balanced operating budget and ample reserves, the City's overall financial health is strong with “money in the bank” for future or unforeseen needs.

As a “contract city”, with public safety services provided by the Los Angeles County Sheriff's Department and the Los Angeles County Fire Department, Rosemead's organizational workforce will continue to operate with only 56 full-time employees complemented by 140 part-time and seasonal positions. Despite these lean staffing levels, the City will continue the delivery of high quality municipal services to the residents and businesses of this community during the upcoming fiscal year.

Looking ahead, we are always monitoring and concerned regarding the escalating costs beyond the City's control. One of the most concerning financial challenges confronting local governments throughout Los Angeles County are the unfunded mandates imposed by the State relative to storm water with associated infrastructure and operation costs that far exceed available resources. City Council, along with City staff, continues to stay current on legislation and regional efforts that impact these unfunded mandates.

Strategic Plan

In 2009, the City Council embraced the strategic plan process which enabled us to identify our threats and opportunities as well as the develop strategies and action items to accomplish key organizational goals. In the summer of 2016, the City Council held several community workshops that resulted in an updated two-year strategic plan that was ultimately adopted by the City Council. The updated strategic plan serves as a “roadmap” to help City staff navigate the goals of the community through June 2018. Through the development and refinement of this vital document, the City Council has affirmed three Key Organizational Goals, which are to:

As mentioned above, the General Fund operating budget is balanced for the upcoming 2017/18 fiscal year, albeit with a small surplus. This will require the City to continue to exercise discipline in managing its finances.

Lean Staffing Levels. During the upcoming 2017/18 fiscal year, the City will operate with 56 authorized full-time employees, 4 “3/4-time” employees with partial benefits (down from a high of 18), and a part-time employee workforce of 140 which is less than half the size of what it was just a few years ago. The City is able to operate with such lean staffing levels due to its nimble “amoeba” organizational structure under which all full-time employees: 1) function as front-line service delivery providers to some degree; and 2) periodically “flex” their hours and job duties across departmental lines during any given work week to serve at special events or meet special needs of the organization. The City continues to “contract” for certain labor-intensive or technical services that can be better managed by the private sector such as engineering, inspections, plan check services, school crossing guards, etc.

In addition to approving reduced staffing levels, in recent fiscal years the City Council has authorized various cost-cutting measures including limits on post-retirement medical insurance benefits, caps on employee vacation accruals, elimination of payoffs for unused administrative leave hours, etc. These prior policy decisions will continue to benefit the City's financial condition into the future.

Revenues. The City's primary income streams in FY 2017/18 include the following.

Property tax revenues continue to be the City's largest source of income. This is true even though what the City receives into the General Fund is less than 7 cents of every local property tax dollar collected. Rosemead is classified as a “low property tax city” with the General Fund receiving only $.0668 of each property tax dollar paid by property owners. (The vast majority of property tax collections are distributed to the state, the county, school districts and various other special districts.)

Sales tax receipts, which comprise the City's second leading source of General Fund revenues, are projected to be $5.5 million in FY 2017/18. Cities receive only one cent ($.01) on the dollar for General Fund uses. Three large general consumer goods businesses, (i.e., Walmart, Target and Macy's) generate 40% of sales tax revenues to the City's General Fund. Recent additions to the business community include a Starbucks Drive-Thru, Hartford Hotel, Boiling Crab, Fairfield by Marriott (Business License issued in 2014, project renovations completed in 2016), and Vic Auto Sales. Projects currently underway include Lucille's Smokehouse BBQ, Ross, Panda Express, and Hampton Inn and Suites. These new businesses will continue to grow, diversify, and strengthen the City's sales tax base. There are also several mixed-use projects under construction that will be completed in fiscal year 2017/18. The mixed-use retail tenants have not been revealed at this point in time.

Hotel transient occupancy tax(TOT) revenues are the third largest source of income to the General Fund. This revenue category is expected to be 5.0% higher than the prior fiscal year due to the opening of Hartford Hotel as well as the continued increased revenues in this category in general.

The fourth leading source of revenue is franchise fee payments to the City. This revenue category has been significantly strengthened through a ten-year agreement with the City's solid waste and recycling hauler Republic Services. The agreement provides the City with 10% of Republic's revenues without “pass-through” charges to residents or businesses on customer bills.

In total, general fund revenues are projected to reflect a modest 5.6% increase over the 2016/17 budgeted revenues.

Expenditures. General Fund expenditures are projected to increase at a higher rate than revenues due to the escalating “cost of doing business.” The City's largest area of expenditures is the Los Angeles County Sheriff's Department contract which will increase by 3.8% over the previous year's costs and the Liability Trust Fund will increase from 9.5% to 10%. Cost items that are expected to escalate at much higher rates include CalPERS pension contributions, property insurance, and utilities. Further, as previously mentioned, state unfunded mandates imposed upon cities by the State Water Quality Control Board relative to storm water runoff will continue to create a financial hardship for the General Fund.

Reserve Funds. The budget for 2017/18 does not anticipate drawing from the fund balance reserve of City's General Fund towards capital improvement projects. At the conclusion of the 2017/18 fiscal year it is projected that the City's General Fund balance will be $17.9 million. (In addition, the City has access to over $3 million which has been reserved in a separate trust fund for future retiree medical insurance obligations.) The bottom line is that the City's reserve funds are healthy and strong.

Economic Development. Growth in the most “elastic” sources of revenue, i.e., sales tax and TOT (hotel bed tax), continues to be the sources of the greatest future opportunity to strengthen the City's financial status. During FY 2017/18, the City will continue its efforts on bringing national name-brand businesses to Rosemead. This past fiscal year, the City has increased our economic development related efforts by creating a webpage focused on economic development, implementing a Commercial Task Force headed by two City Council Members, retained the professional services of HdL EconSolutions to assist with tenant outreach efforts and to compile socio economic data, hosted our first annual broker's roundtable, and implemented a monthly business visitation program to recognize and monitor our existing business base. We also were a finalist in the Los Angeles County Economic Development Corporation's (LAEDC) Most Business Friendly City Awards. The City's investment from its General Fund reserves for the development of a Garvey Avenue Specific Plan and EIR will be completed in the fall of 2018, and should help to spur and guide economic development at key opportunity sites. In addition, the City will continue to focus on infrastructure improvements and community beautification as a foundation for continued economic development.

Strategic Goal: Enhance Public Safety and Quality of Life

The number one funding priority of the City continues to be law enforcement to ensure the safety of our residents, businesses and visitors. The budget allocation for the Public Safety Department includes a 3.8% increase in annual costs for the Los Angeles Sheriff Department (LASD) contract as well as a 0.5% increase in the Liability Trust Fund portion of the LASD contract. Key components of the City's Public Safety efforts include the following:

“Rosemead Model” for Public Safety. The “Rosemead Model” is a unified command structure that features a Sheriff Lieutenant serving as the City's Chief of Police. This organizational structure enables Rosemead to maximize the financial benefits and abundant resources of being a “contract city” while, at the same time, strengthening the City's ability to exercise “local control” in addressing challenges unique to our community. Utilizing this model, the Public Safety Department will continue efforts to combat crimes that are largely attributed to adverse impacts of the state correctional system known as “realignment” and the passage of a state-wide proposition that decriminalized various drug related offenses. These changes continue to result in the early release of thousands of convicted felon PSP's (post-released supervised parolees) and drug offenders back onto the streets in Los Angeles County.

Continuation of Deployment Levels. This budget continues to provide funding for the Sheriff's full complement of a Lieutenant, a Sergeant, three to five Deputy squad cars patrolling the streets of Rosemead on a continual basis, supplemented by one Motorcycle Deputy, and seven Special Assignment Team (SAT) Deputies. In addition, a Deputy is assigned as a full-time School Resource Officer (SRO) at Rosemead High School. Also, the City contracts with Los Angeles County for a full-time probation officer focused on at-risk youth in the community.

Community Outreach. During FY 2017/18, the Public Safety Department will continue to convene “Area Watch” meetings in each of the neighborhoods of the City. On a monthly basis an Area Watch meeting will be held at a neighborhood school or church to interact with residents. Under this program, the Public Safety Department will visit each neighborhood during the course of the year to share a meal with residents to discuss crime prevention and various public safety issues. In addition, the Public Safety Department will continue to coordinate monthly CONNECTIONS meetings. CONNECTIONS is a “grassroots” group of citizens, community-based organizations, churches, schools, City Council, and staff with a mission to prevent crime and combat drugs and alcohol abuse, promote positive recreational activities and community service opportunities, coordinate with human and social services organizations, and facilitate emergency preparedness.

Recreation Programs and Special Events. Rosemead's outstanding Parks & Recreation Department continues to organize programs and special events that contribute greatly to the quality of life in the community. In FY 2017/18 the Department will continue its robust sports programs on Saturdays and evenings during the week for youth and families at the recently renovated Garvey Park Gym and other venues throughout the community. In addition, after school drop-in recreation programs will continue to be offered at Rosemead Park and Garvey Park at no cost to participants. A full calendar of major special events will be administered for the community.

City staff is currently working with the Boys & Girls Club of West San Gabriel Valley to expand their footprint to include a Rosemead based facility at Garvey Park. This new program will supplement our current Parks & Recreation services and is anticipated to be finalized during the new fiscal year. A full schedule of aquatics programs will again be conducted at the Rosemead Aquatic Center and at the Splash Zone at Garvey Park with recreation swim admission prices of only $1 for children and $2 for adults

A full slate of community special events will be held in FY 2017/18, including the 4th of July festivities, Summer Concerts in the Park, 9-11 Memorial Remembrance, Fall Fiesta, the Moon Festival, Trunk or Treat, the Annual Tree Lighting Ceremony, Eggstravaganza, and the Memorial Day Remembrance.

Facility Enhancements. The recent completion of the Rosemead Skate Plaza and remodel of Zapopan Park have helped to expand the amenities and quality of life offered to our residents. Both projects are being actively used by members of the community.

Quality of Life Initiatives. The implementation of the Quality of Life Team in the summer of 2016 has proved to be a success. In less than one year this multi-agency team has eliminated over 77 tons of debris from our local streets and helped to address the ongoing concerns relating to homelessness in our community. This program operates with no cost/impact to our budget.

Rosemead continues to place heavy emphasis on the 710 Coalition Advisory Committee. Not finishing the last piece of the 710 freeway system has exposed our local youth, residents, and businesses to higher than necessary air pollution caused by day-and-night bumper-to-bumper traffic along our local street corridors that are being used as alternate routes for travelers. City Council and City staff are hopeful that a successful resolution will be brought to this social injustice that has taken place for decades.

City staff is also engaged in regional efforts for the proposed light rail stations along State Route 60 that could benefit our residents and businesses.

During FY 2017/18, the City will continue its excellent work to improve and maintain the public infrastructure and aesthetics of the community. An aggressive capital improvement program (CIP) administered by the Public Works Department includes, funding for improvements to various roadways, sidewalks and traffic signal upgrades, parks and storm water improvements. Way Finding signs were installed throughout the community during fiscal year 2016/17. The community will also see the Garvey Avenue Pavement Resurfacing Project from Del Mar Avenue to the eastern City limits, the Delta Avenue Sidewalk Installation Project from Mission Drive to Well Street, and the Walnut Grove Utility Underground Project from Marshall Avenue to Valley Boulevard in fiscal year 2017/18. After seven years of pre-construction related work, the California Public Utilities Commission recently approved the construction and revitalization of Jay Imperial Park. This project will be started and completed during this new fiscal year. While the City strives to maintain an aggressive capital improvement program, capital projects along streets and roadways will be less due to the City spending down the fund balances of Proposition C, Measure R, Gas Tax, and Street Lighting District Fund in the prior years. The City needs to build up the fund balances for future capital spending.

The City's Beautification Committee continues its grassroots efforts to encourage and facilitate citizen volunteerism in improving the aesthetic appeal of the community. The second Annual Civic Pride Day was a tremendous success that resulted in landscape/drainage improvements to Sanchez Elementary School and landscape improvements to the Jess Gonzalez Sports Complex.

Conclusion

The FY 2017/18 budget is a transparent, dynamic and responsible financial plan that will enable the City to continue to provide the community with a full scope of high quality municipal services, programs and special events that enhance the quality of life of all residents. It will also provide the required resources to construct significant capital improvement projects that will improve infrastructure and facilities, and beautify the community.

With vision and direction provided by the City Council and Commissions through the Strategic Plan, and with the effective work of each of the City departments, the City is operating with a clear understanding of our community's values, while continuing to maintain financial stability. This budget will enable Rosemead to continue its quality of life as a welcoming and thriving community that honors tradition, unites in diversity and evolves for the future.

It is my sincere pleasure and honor to serve as your City Manager. Under the leadership of the City Council, I look forward to a successful fiscal year that brings us closer to achieving the goals of our strategic plan and enhancing the level of service we provide to our community members.